Temasek IT School

Quality & Service Management

AY 2007/2008 October Semester

Service Level Agreement (SLA) – Part 1

Tutorial Questions

1. 2 major components in Outsourcing contract are Statement of Work (SOW) and

Service Level Agreement (SLA).
What is your understanding of the SLA in an outsourcing contract? How do you define it?

An agreement between the provider of a service and its customers which quantifies the
minimum level of service and sets out costs and criteria for delivery

The SLA specifies criteria such as volume of work that should be completed within a
timeframe, acceptable response times for requests, quality requirements and measures of
efficiency.

2. What are the main objectives of the SLA in an Outsourcing agreement?

 States what the customer needs by providing a service statement

 Shows the mechanics and processes of fulfilling those needs
 Describes the volumes to be handled and the ways of measuring them
 Define the parameters by which the work will be preformed

The SLA specifies criteria such as volume of work that should be completed within a
timeframe, acceptable response times for requests, quality requirements and measures of
efficiency.

It contains different types of specifications including a) functional b) performance and c)

technical specifications.

3. How would a company be able to manage risks and implement controls in an Outsourcing
agreement? Discuss this in the context of the execution of the SLA in the agreement.

Some of the measures that are stipulated in the SLA include:

 Penalty clauses for failure to deliver on stated service levels
 Exit strategy and conditions for termination
 Clear table of Key Performance Indicators appended to the SLA

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 Detailed problem and incident management process that include escalation procedures and
reporting
 Requirement for regular meetings to be held to do a Service Review of the contract
 Clearly stated levels of Management that include designation, names and contact details for
both the client organization as well as the service provider organization. This would then
details at what levels the various problems would be dealt with and who the counterparty at
the other side would be

4. What would you consider as the more important guiding principles in the selection of the
metrics in the SLA?

Choose measurements that motivate the right behavior

Ensure metrics reflect factors within the service provider’s control
Choose measurements that are easily collected
Less is more
Set a proper baseline

(Please refer to the Article “Metrics for IT Outsourcing SLAs” by Ian S.Hayes for a detailed
discussion on the above guiding principles.)

5. When setting up an SLA to control and manage the outsourcing agreement, there are
many possible metrics to put in place. The simplest way to handle these metrics is to
group them into categories, then decide which ones in a given category work best for a
particular project.
What are some of the possible categories that may be used to put in place the desired
metrics for the SLA?

 Volume of work
 Quality of work
– Defect rates
– Standards compliance
– Technical quality
– Service availability
– Service satisfaction

 Responsiveness
– Time-to-market or time-to-implement
– Time-to-acknowledgement
– Backlog size

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 Efficiency
– Cost/effect efficiency
– Team utilization
– Rework levels

(Please refer to the Article “Metrics for IT Outsourcing SLAs” by Ian S.Hayes for a detailed
discussion on the above categories for the metrics.)